first, someone suggested that i get my information from the book leisureville. while i have corresponded with the author in the past, i have never read leisureville. it is about the culture and lifestyle of the villages. i don’t care a whit about either of those issues. my columns are about the underlying financial structure. my information comes strictly from public documents – documents that YOU can get if you wish.
…to dillywho who asked how i know that the CDD spent $209,000 so far on lawyers. i know this because the CDD is government, and records of governments using YOUR money are public. you can get these same records by doing the exact same thing i did -- email
janet.tutt@districtgov.org regarding the question of whether i think the developer should take all the risk to provide great amenities (and they sure are) but charge you nothing….the answer is of course not. but neither do i think he should be charging you twice for the same amenities plus interest.
… to the shadow…yes, you understand this perfectly when you say that the IRS is after the districts, NOT the developer. and who is the districts? it is the developer, but his source of income is YOU, the homeowner.
...man about town asks whether the IRS is disallowing tax exempt status for all CDDs in Florida. the answer is a big NO. that has nothing to do with politics. see the explanation above.
…zcaveman speculates that my bosses assign me articles. um, no, dude. i’m a columnist, not a news reporter. i am not based in orlando, as someone else suggested. i have lived in lake county for 30 years and have worked for the sentinel all that time in a number of capacities.
…saratoga man asks how residents could be liable for any tax problems. even tho the village center district and the sumter landing district are controlled by the developer, all of the money to operate comes from your ammenity fees. last time i checked, roughly half of the $40million or so that the VCDD collects in fees is spent on repaying the bonds. .
…jim joe you say that your understanding is that the two commercial districts get ammenity fees and pay the lawyers with that money. yes. that is precisely how it works.
…willy…you have a perfect understanding.
…bogie shooter…you ask whether the lawyers really were paid from ammentiy fees. oh, yes, indeed. there is NO other source of $$ but YOU.
now, i want to correct a few errors in edvin’s post. see below:
Ritchie: As The Villages was built, its developer Gary Morse created a form of government called community development districts, the same type scrutinized in this column last week.
There are 10 of these ‘numbered’ CDDs that make up the residential homes in The Villages, the first of which was established way back in 1992. And these 10 numbered districts do not have nor do any of the residents have any ownership of any recreational or amenity facilities. There may be a beautiful club house with an olympic sized pool smack dab in the middle of one of these numbered districts, but it is not a part of it.
this is not entirely correct. the 10 numbered districts do not, indeed, own the ammenities, whether they are pools or gatehouses. BUT the sad thing is that the villages homeowners ARE paying for these ammenities through fees that to to the village center and sumter landing districts. that’s because those ammenities were purchased from the developer by the district . that’s what the bonds were for.
Ritchie: In the Villages, two main community development districts have sold bonds to buy the infrastructure and recreational facilities — things like lights, roads, sewer and water plants, clubhouses, golf courses, gatehouses and more — from the developer.
The fact is that the developer built all of the executive golf courses, club houses, pools and the myriad recreational facilities with his own money for commercial purposes. And perhaps because it also included facilities for security, emergency, and fire protection, Florida allowed him to place those facilities under the two special CDDs that are the subject here. But you are misguiding your readers by implying that the monies received from these particular bonds were used to pay for the infrastructure of hundreds of miles of roads and sewers that are in the 10 numbered residential CDDs when in fact each of those numbered districts received their own bonds to pay for their infrastructures.
again, not entirely correct. the state of florida did NOT allow the developer to create districts for the reasons that edvin stated. developers are allowed to create districts to govern the area. the bonds that then were issued by the two main districts, especially the early bonds, DO include various infrastructure items. but the bonds the IRS district is most uncomfortable with are called “recreational revenue bonds,” and those include clubhouses, pools, golf courses, etc
Ritchie: That's the way it worked, too, in the other Florida districts that have issued bonds. However, The Villages bond deals differ in two key ways......
First, the seats on the district governing boards in other developments typically are turned over to the residents as buyers purchase lots and move in. Not so in The Villages, where the districts selling the bonds in question are controlled by the developer and deliberately are set up so he can keep them out of the hands of residents for as long as he wants.
Florida Chapter 190 specifies that voting in a CDD is based on land ownership, not residency[/B. And the residents of The Villages do not own any of the land, property or amenities that make up the two special CDDs. So quite simpy, they didn't, don't, and never will own or control those amenities. And furthermore, every one of the seventy five thousand or so residents of TV signed a contract acknowledging this when they purchased their home. Here is the specific paragraph:
<B>
4.1(g) Purchasers of Homesites further agree, by the acceptance of their deeds and the payment of the purchase price therefore, acknowledge that the purchase price was solely for the purchase of their Homesite or Homesites, and that the owners, their heirs, successors and assigns, do not have any right, title or claim or interest in and to the recreational areas, security facilities, dedicated or reserved areas or facilities contained therein or appurtenant thereto, by reason of the purchase of their respective Homesites, it being specifically agreed that, (1) the Developer, its successors and assigns, is the sole and exclusive owner of the areas and facilities, and (2) the Contractual Amenities Fee is a fee for services and is in no way adjusted according to the cost of providing those services.
EDVin is correct in that residents are not charged. i was simply looking for another word for “homeowners.” everything in this scenario is based on the ownership of lots, not who lives there.
</B>
Ritchie: Second, these districts — remember that they're controlled by the developer — are using part of the bond money to buy "blue sky" from the developer. In this case, it is simply the right to collect assessment fees from residents. The developer gets all the fees in his bank account now instead of having to wait for them to dribble in over 30 years. Lucky residents get to repay the bond through fees — with interest — for 30 years to come.
Here’s where you and your cohorts really try to pull the wool over everyone’s eyes because you always neglect to acknowledge that because of the unusual structure and contract on their amenities, the residents of The Villages have what amounts to virtual rent control of all of their wonderful amenities. And here’s the paragraph from the contract that enforces this:
<B>
4.1 (b) The monthly Contractual Amenities Fee set forth herein is based on the cost of living for the month of sale as reflected in the Consumer Price Index, U.S. Average of Items and Food, published by the Bureau of Labor Statistics of the U.S. Department of Labor ("Index"). The month of sale shall be the date of the Contract for Purchase of the Homesite. There shall be an annual adjustment in the monthly Contractual Amenities Fee. The adjustment shall be proportional to the percentage increase or decrease in the Index.
edvin’s idea of rent control is pretty bizarre. HALF of what you pay goes to repay bonds –with interest. if these bonds have to be recalled, the only source of income is YOU, the owner. if you have a set amount you have to pay, then where you think the money will come from? it can come from one place and one only: it will come from that set ammenity fee you pay. if you get less in the way of ammenties because MORE than half is going to settle this mess, then so be it. </B>
Ritchie: What a beautifully magnificent source of unfettered, risk-free cash for the developer. The other districts in Florida buy things they can touch, such as water plants. "Blue-sky" transactions haven't been included in their bond deals.
[B]But as you yourself pointed out, 41% of those ‘other’ communities are in financial trouble. The Villages is not, in spite of what you would like everyone believe.
the problem with edvin’s logic here is simple. first, these communities DO NOT operate like the villages VCDD or SLCDD. they are not comparable. second, the communities that are in trouble are the ones where the developer either went belly up or could not sell enough lots to make the bond payments. neither is the case in the villages. the developer is VERY well capitalized, thanks you YOU, the homeowner.
Ritchie: Community development districts that buy infrastructure from developers are a rip-off to the consumer, never mind The Villages' "blue sky" purchases, which are just a secondary piece of legal thievery.
In subdivisions without districts that issue bonds, buyers pay for the infrastructure in the price of the house. In those with districts, they do, too. But in addition, they pay a second time for that infrastructure — with interest — as they pay off the bonds, which often add an extra $20,000 to the price of a house.
this comes from simple observation. consider this: clearly, the villages has more ammenities than any other community. but consider your 1,500 square foot house or whatever. what price could you buy that same size house for at say, royal harbour, or arlington ridge or some other community? it is roughly the same price, i believe. you aren’t getting a discount. so, some other communities have at least SOME of the same ammenities and those folks are paying the same amount. but YOU are paying another $20K to $25K extra for your ammenities. plus interest on bonds. ouch.
Where is this coming from? I’m afraid you’re losing it dear girl. Sometimes I think ideas drop from your head to your tongue like candy from a gum ball machine.
Ritchie: ……. The district already has spent more than $209,000 of residents' money so far, nearly all on high-powered lawyers on both coasts.
Here again we have a very misleading statement. The two special CDDs have not spent one dime of the resident’s money. They have in fact spent $209,000 (or whatever) of their own money on legal defense. Yes, yes we all know the source of that money, it’s the amenity fees paid by the residents. But the moment those amenity fees are deposited into the account of those two CDDs it’s no longer the residents’ money. However, the annual maintenance fee paid by residents to their respective numbered residential CDD is their money because they have ownership in that CDD and a vote in how that money is spent.
Still having trouble with this? Here’s a simple example. You decide to order cable service and sign up for a two year contract with a sweet deal monthly price. Part way into the contract, the cable company gets into a legal battle over something and spends a ton of legal fees to straighten it out. Whose money is paying for this? Why the cable companys' of course. Can the cable company raise the fee to cover the legal fees? Yes but only after the contract ends and at the risk of losing you as a customer. But the two CDD’s can’t do that with the amenity fee. It’s fixed at the time of the original sale with annual increases limited to the CP Index and the term of the contract is for the life of the residence. So who cares how that money is spent.
this analogy is not appropriate. cable companies are private, for-profit businesses. the CDD is a government, and as such is supposed to act in the best interest of its citizens, the people who are paying taxes. in this case, the “tax” or ammenity fee, is paid by people who are not living in the district, thus the IRS issue. EdVIn asks who cares how the money is spent? the answer is YOU should care. of half your ammentity fee weren’t going to repay bonds that were issued with the sole purpose of making the develper rich, then you would have some seriously cool ammenities.
folks, if you’ve stuck with me for this long, thank you very much for your attention. this is a tough issue and very complicated.
i’d like to make a distinction here. lots of folks seem to think i’m a “village-hater.” that’s just wrong. i don’t care a whit about the lifestyle one way or the other.
what i don’t like is seeing retired people getting ripped off. i consider community development districts in general, and these in particular, a rip-off to buyers. that’s my opinion, and yours can certainly be different. but yours is completely invalid if you don’t undertand how this works. my columns are focused the financial deals and on showing you how these deals have created your community. if you totally understand and are OK with that, so be it. but i have zero interest in debating your lifestyle
i wish you all the best. heck, in a few years, i hope to be enjoying my own retirement.
lauren ritchie